2009 - %3, October

No Exit

| Wed Oct. 7, 2009 11:48 AM EDT

Betsy McCaughey's mendacious article "No Exit," which ran in the New Republic in 1994, has long been given a share of the credit for killing the Clinton healthcare plan.  Andrew Sullivan, who was TNR's editor at the time, says he's addressed all this before, he's sorry he published the piece, he ran plenty of rebuttals, and anyway Clinton's bill had plenty of other problems too.  Fine.  But he also tells us today that he tried to correct some of McCaughey's worst excesses but failed:

One key paragraph — critical to framing the piece so it was not a declaration of fact but an assertion of what might happen if worst came to worst — became a battlefield with her for days; and all I can say is, I lost. I guess I could have quit. Maybe I should have. I decided I would run the piece but follow it with as much dissent and criticism as possible. I did discover that she was completely resistant to rational give-and-take. It was her way or the highway.

He lost?  He was the magazine's editor.  So who forced him to run the piece?  Andrew says he doesn't think it's professional to "air the specifics of internal battles after the fact," but you can hardly go this far without doing exactly that.  He's basically implying pretty strongly that he didn't want to run the piece but had to anyway, and had to run it precisely to McCaughey's specifications.  That's pretty extraordinary.  Having said that much, surely he owes us the rest of the story?

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Self-Regulation FAIL

| Wed Oct. 7, 2009 11:34 AM EDT

Writing my screed against the AMA's ridiculous price-setting cabal got me thinking. Is there a single example of a profession that self-regulates in a way that's good for society as a whole, as opposed to protecting the interests of the members of that profession at the expense of everyone else? Liberals often slam industries when they talk about a desire to "self-regulate." Why shouldn't we be skeptical of the same claims from professional associations? Doctors (with their labor theory of value) and lawyers (with their billable hours) are just the most pernicious examples of professions that have structured their compensation in ways that are deeply harmful to the public interest.

Of course, with government regulation, you run the risk of industry capture—professions can and do simply petition the government to enact regulations that only serve the interests of their members—requiring interior designer licenses, for example. But self-regulation has no chance of working for anything other than the professionals' self-interest. So it seems like government regulation at least gives you the chance of a result that serves the greater good. People and industries do not consistently act against their self-interest. So if an industry or a profession or a person's self-interest runs contrary to the public good, there's a case for changing the law and instituting penalties that change that calculus.

Restarting the Credit Markets

| Wed Oct. 7, 2009 11:26 AM EDT

The New York Times reports that bank lending is still frozen because the debt securitization market, which collapsed last year, is still dead.  And if banks can't bundle up their loans, securitize them, and sell them off, they just won't make any loans.  "As long as the market remains closed," says the piece, "banks will be reluctant to make loans for commercial real estate, since they would have to hold on to them, rather than package them into securities."  Paul Krugman is curious about this:

But here’s my question: why does it have to be a return to shadow banking? The banks don’t need to sell securitized debt to make loans — they could start lending out of all those excess reserves they currently hold. Or to put it differently, by the numbers there’s no obvious reason we shouldn’t be seeking a return to traditional banking, with banks making and holding loans, as the way to restart credit markets. Yet the assumption at the Fed seems to be that this isn’t an option — that the only way to go is back to the securitized debt market of the years just before the crisis.

Why? Are we still convinced that securitization is a far superior system to conventional banking, and if so why?

Good question.  Does it have to do with still weak bank capitalization?  After all, if banks are still deleveraging, there's no way for them to expand their loan books unless they can sell off the new loans they make.  So it's either securitization or nothing.

Alternatively, it could be that banks simply aren't willing to take on the risk of new loans and are only willing to extend credit if they can sell off the risk to someone else.  But that doesn't seem like much of an explanation.  Back in the boom years, there were plenty of eager buyers for loan bundles who didn't care much about the quality of the underlying loans, but those days are long gone.  If the loans aren't top notch, nobody will take them.  So there's not much point in trying to move the risk around just for its own sake.

In any case, I wonder if this is really a worthwhile concern?  Securitization has been around for decades and isn't necessarily a bad thing.  It only becomes bad when the securities themselves, which are relatively simple, get bundled into ever more complex bundles of CDOs, CLOs, synthetic CDOs, etc. etc., all with implicit leverage of 30:1.  It's the second and third level bundling and the outrageous leverage that helped fuel the recent credit bubble, not plain jane securitization.

Anybody have some alternative explanations?

Arizona Sheriff Collared, Bad Policy Still at Large

| Wed Oct. 7, 2009 11:25 AM EDT

Infamous Arizona Sheriff Joe Arpaio—subject of scorn and New Yorker profiles, who flaunts his brutal treatment of undocumented immigrants in Maricopa county—may be smarting since his deputies were stripped of their power to arrest and detain suspected immigration offenders last week. But the bad policy he epitomized is far from gone.

In fact, the program is expanding, despite ample evidence that it undermines local police work. Known as 287(g), the program is meant to snag gang bangers, coyotes and narcotraficantes.  In practice, however, it grants local cops the authority to begin deportation proceedings over a speeding ticket, or to aid ICE in home raids, or to generally intimidate whole immigrant communities, documented or otherwise, into avoiding law enforcement altogether. Though the Obama administration has revised the program's most contentious aspects (participants will have until October 15th to sign off on watered-down privileges), the most basic problems remain. 

"We have seen, in late spring, the release of additional 287(g) agreements. [The administration] promised a review of those agreements, but in the process there has been an expansion to additional localities," said Gabriela Villareal, advocacy coordinator for the New York Immigration Coalition. "Any enforcement of immigration law should be placed in the hands of the federal government. [287(g)] creates an additional level of distrust in the community."

Copen-bloggin': Building Codes, Sexier Than You Think

| Wed Oct. 7, 2009 11:04 AM EDT

Energy efficiency is not particularly exciting. But it is among the best hopes for a quick fix on emissions in the US, and it's another area where Denmark has made significant progress. Improved building codes lowered the overall cost of heating Danish buildings 20 percent between 1975 and 2001, even though the amount of space that needed to be heated in homes and buildings expanded by 30 percent over the same period of time, according to the Danish Energy Authority.

It's not like we don't now about the value of improved efficiency in the US. The McKinsey study on the value of greater efficiency has been cited repeatedly in recent months. It includes a litany of potential benefits that could come by simply making our building stock less wasteful. Energy use in buildings accounts for 40 percent of our fossil fuel use and, thus, 40 percent of our emissions. More than half of that is used on heating and cooling, and much of that leaks out thanks to woefully inefficient construction.

The McKinsey report found that investing in energy efficiency measures for the nation's buildings has the potential to reduce energy consumption 23 percent by 2020, save up to $130 billion a year, cut emissions of 1.1 gigatons, and create 900,000 new jobs. That would put us well on our way to the carbon dioxide emissions reductions being discussed in Congress, for one, and would save Americans a heck of a lot of money. What's not to like?

Blame Doctors for America's Primary Care Doctor Shortage

| Wed Oct. 7, 2009 10:51 AM EDT

Andy Kroll had a good piece on the front page yesterday explaining the problems that America's looming shortage of non-specialty doctors could cause for health care reform. Here's the gist: 

If primary-care medicine in the US were a patient, its diagnosis would be grim. The first responders to illness and pain, who can spot and treat chronic conditions in their early stages, primary-care doctors are in greater demand each year. In 2006, just more than 250,000 primary-care doctors practiced in the US—by some estimates, that was about several thousand to more than 7,000 less than the demand. The Association of American Medical Colleges projects that by 2025 the demand for primary-care doctors will have soared to nearly 320,000 doctors nationwide, a 29 percent increase from 2006 and the most for all types of physicians.

Andy explains that "part of this supply problem is financial"—primary care docs make much less money than specialists. Do you know why that is? After all, basic economics should tell you the opposite—if primary care doctors really are in short supply, they could charge more, and they would make more. Except that the American health care delivery system is not a free market. Far from it. It's a system dominated by a single payer—government spending on Medicare and Medicaid—that hugely affects prices throughout the system. The amount that Medicare and Medicaid pay has a huge effect on doctors' bottom lines. And Medicare and Medicaid don't pay based on results. They don't pay based on supply and demand. They pay based on how "hard" a procedure is. Slate health care columnist Darshak Sanghavi explained how this works last month:

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We're Still at War: Photo of the Day for October 7, 2009

Wed Oct. 7, 2009 7:11 AM EDT

Spc. Jesse A. Murphree, Destined Company, 2nd Battalion, 503rd Infantry Regiment (Airborne), greets his 173rd Airborne Brigade Combat Team comrades returning from deployment in Afghanistan, on the flight line at Aviano Air Base, Italy, July 22. Murphree lost his legs in an improvised explosive device attack in the Korengal Valley, near Ali Abad, Afghanistan, Dec. 27, 2007. (US Army photo via army.mil.)

Need To Read: October 7, 2009

Wed Oct. 7, 2009 6:45 AM EDT

Today's must-reads:

Get more stuff like this: Follow me on twitter! David Corn, Mother Jones' DC bureau chief, also tweets, as does MoJo blogger Kate Sheppard. So do my colleagues Daniel Schulman and Rachel Morris and our editors-in-chief, Clara Jeffery and Monika Bauerlein. Follow them, too! (The magazine's main account is @motherjones.)

Chart of the Day

| Tue Oct. 6, 2009 7:26 PM EDT

Good news for haters of the nanny state: New York City's new law requiring calorie counts on chain restaurant menu boards doesn't appear to be making any difference.  In fact, it might be causing people to eat more.

The full study is here.  Results are below.  The researchers chose 14 fast-food outlets in low-income NYC neighborhoods (Newark was a control group) and interviewed a few hundred people both before and after the calorie labeling law went into effect, asking them if they'd noticed the calorie counts and if they'd changed their selection because of it.  Then they got receipts from each respondent so they could find out what they'd actually purchased.

The results were pretty dismal: only about half the respondents even noticed the calorie counts and only 15% said they influenced their choice.  But the receipts told an even more dismal story: overall, people actually purchased more calories after the law went into effect.  The results aren't statistically significant, though, so basically all the researchers can really say is that the law (so far) hasn't had any effect.  The only glimmer of good news is that among people under 35, respondents who noticed the labeling did seem to cut back a bit.  No other subgroup showed any effect.  So who knows?  Young people probably respond to this kind of thing more quickly than older people, so maybe it's just going to take some more time before all this stuff sinks in.

Vote Taliban in 2010?

| Tue Oct. 6, 2009 6:44 PM EDT

Instead of fighting the Taliban, why not encourage them to run for office? Tell them to form their own political party, and they could officially govern many of the local Pashtun areas already under their control. Think of it: "Vote Taliban in 2010."

That’s one of the proposed solutions offered in a Financial Times op-ed on Tuesday with some fresh ideas on how the West can best exit Afghanistan. In a bloody conflict where tangible solutions are as rare as authentic election ballots, the op-ed’s authors—Maleeha Lodhi, Pakistan's former ambassador in Washington, and Anatol Lieven, a professor at King's College London—offer Western leaders some food for thought in avoiding a disastrous exit, and a framework for withdrawal that hasn't figured much into US debates on the issue.