Kevin Drum - August 2009

Fighting Back

| Mon Aug. 3, 2009 5:50 PM EDT

The latest schtick from right wing activists is an organized effort to disrupt town hall presentations from members of Congress who are in their home districts during the August recess.  According to Robert MacGuffie, who runs the website rightprinciples.com:

Tea partiers should "pack the hall... spread out" to make their numbers seem more significant, and to "rock-the-boat early in the Rep's presentation...to yell out and challenge the Rep's statements early.... to rattle him, get him off his prepared script and agenda...stand up and shout and sit right back down."

Lovely.  But Mark Kleiman has the same idea as me:

If I were a Member of Congress threatened by this nonsense, I wouldn't stop holding town meetings; I'd start out each meeting by welcoming my constituents and warning them that there's an organized group in the hall planning to disrupt the proceedings. Never pass up an opportunity to portray your opponents as extremists, especially when they are.

I might be careful about doing this in states with concealed carry laws, but otherwise it sounds like a pretty good idea.

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Getting to Yes

| Mon Aug. 3, 2009 5:20 PM EDT

I missed this a couple of days ago, but Robert Pear and David Herszenhorn write in the New York Times that for all the turbulence surrounding healthcare reform right now, there's actually a surprising amount of bipartisan consensus about certain parts of it:

Lawmakers of both parties agree on the need to rein in private insurance companies by banning underwriting practices that have prevented millions of Americans from obtaining affordable insurance. Insurers would, for example, have to accept all applicants and could not charge higher premiums because of a person’s medical history or current illness. All insurers would have to offer a minimum package of benefits, to be defined by the federal government, and nearly all Americans would be required to have insurance.

....Lawmakers also agree on the need to provide federal subsidies to help make insurance affordable for people with modest incomes. For poor people, Medicaid eligibility would be expanded.

The chaos on Capitol Hill, combined with bitter disagreements over how to pay for the legislation and the role of a public plan, has obscured the areas of potential consensus.  “There is wide agreement on the two elements of the legislation that the public cares about most: insurance market reforms and the expansion of coverage, with subsidies,” said Drew E. Altman, the president of the Kaiser Family Foundation, which focuses on health policy.

In other words: community rating plus subsidies for low-income families.  That's nice to hear.  I'd like a lot more than that, of course, but if we manage to pass a bill that contains reasonably strong forms of both these things, it will be a huge step forward.

(Via Jonathan Zasloff.)

Negative Interest Rates

| Mon Aug. 3, 2009 3:24 PM EDT

Tyler Cowen writes today about the monetary views of Scott Sumner:

The Fed has already taken some unconventional monetary measures to stimulate the economy, but they haven’t been entirely effective. Professor Sumner says the central bank needs to take a different approach: it should make a credible commitment to spurring and maintaining a higher level of inflation, promising to use newly created money to buy many kinds of financial assets if necessary. And it should even pay negative interest on bank reserves, as the Swedish central bank has started to do. In essence, negative interest rates are a penalty placed on banks that sit on their money instead of lending it.

Much to the chagrin of Professor Sumner, the Fed has been practicing the opposite policy recently, by paying positive interest on bank reserves — essentially, inducing banks to hoard money.

Of all the things the Fed has done to fight the recent financial meltdown, this is the one I've never quite understood: paying interest on bank reserves.  As a general policy it might be a good idea (Steve Randy Waldman wrote a decent primer about it here), but as Sumner points out, in the middle of a financial crisis it gives banks an incentive to hoard money at the Fed instead of loaning it out.  That's the opposite of what we want.

On the other hand, minimum bank reserves are still mandatory in the U.S., so I guess I also don't understand the point of negative interest.  Banks are required to keep those reserves at the Fed, so they couldn't withdraw them even if they wanted to.  Essentially, a negative interest rate would just be a tax on banks.

So, as usual, I'm confused.  This doesn't really seem to make sense either way.

MoJo Mix: 3 August 2009

| Mon Aug. 3, 2009 2:02 PM EDT

I can't decide whether the ongoing Birther resurgance is a) the usual wingnuts doing their usual wingnut thing, or b) a brilliant GOP tactical ploy to divert attention from health care reform. You? While you mull it over, 3 more questions for your Monday mix:

1) Will health care reform actually happen?

2) Carbon footprint, sure. But what's your water footprint?

3) Why is HBO's 40-year-old co-creator of Hung claiming there are no talented and attractive actresses over 35?

Laura McClure hosts podcasts, writes the MoJo Mix, and is the new media editor at Mother Jones. Read her investigative feature on lifehacking gurus in the latest issue of Mother Jones.

Health Insurance Hell

| Mon Aug. 3, 2009 1:34 PM EDT

The big fault line in the healthcare debate right now is over the "public option" — a proposal that people should have the option of getting healthcare coverage from either a private insurance carrier or from a government program.  Conservatives are worried that this would put too much pressure on private insurers, but Michael Hiltzik asks the obvious question: who cares?

The firms take billions of dollars out of the U.S. healthcare wallet as profits, while imposing enormous administrative costs on doctors, hospitals, employers and patients. They've introduced complexity into the system at every level. Your doctor has to fight them to get approval for the treatment he or she thinks is best for you. Your hospital has to fight them for approval for every day you're laid up. Then they have to fight them to get their bills paid, and you do too.

....Why do we tolerate this? The industry loves to promote surveys indicating that most Americans are "satisfied" with their current health insurance — 37% are "very satisfied" and 17% "extremely satisfied," according to one such study.

Yet these figures are misleading. Most people are satisfied with their current insurance because most people never have a complex encounter with the health insurance bureaucracy. Medical care generally follows the so-called 80-20 statistical pattern — 20% of patients consume 80% of care. If your typical encounter is an annual checkup or treatment of the kids' sniffles, or even a serious but routine condition such as a heart attack, your experience is probably satisfactory.

But it's on the margins where the challenges exist. Anyone whose condition is even slightly out of the ordinary knows the sinking feeling of entering health insurance hell — pre-authorizations, denials, appeals, and days, weeks, even months wasted waiting for resolution.

Sounds great to me!  Why would anyone want to change this system?

Health insurance is a weird industry.  Healthcare itself is provided by doctors, nurses, hospitals, pharmaceutical companies, hospices, and device makers.  Insurance companies do none of this.  They don't do research, they don't perform surgeries, they don't change bedpans, and they don't make diagnoses.  They're just middlemen.  All they do is pay the bills after marking them up 30%.  They don't do anything at all to make healthcare better or more efficient.

But for some reason we're supposed to care about whether they continue to exist or not.  Why?  I care about the quality of my doctors, my nurses, the hospital I go to, and the drugs I take.  I don't really care who takes on the administrative task of paying the bills — except that I wish they were handled a lot more efficiently and with a lot less hassle than private insurers typically do.  Frankly, a world without private healthcare insurers sounds pretty good to me.

And as long as we're reading the LA Times, they've got a nice piece by Michael Rachlis, a doctor in Toronto, about the Canadian healthcare system.  Guess what?  It's pretty good!  It's not the system I'd choose — in particular, I think public funding should provide a basic level of healthcare but patients should always have the right to pay more for better care if they want to — but it works as well or better than ours for a fraction of the cost.  Read the whole thing for more.

Public Diplomacy Takes Center Stage

| Mon Aug. 3, 2009 12:47 PM EDT

The New York Times reports that the communicator-in-chief plans to take his show on the road:

In coming weeks, senior administration officials said, the White House will begin a public-relations campaign in Israel and Arab countries to better explain Mr. Obama’s plans for a comprehensive peace agreement involving Israel, the Palestinians and the Arab world.

The campaign, which will include interviews with Mr. Obama on Israeli and Arab television, amounts to a reframing of a policy that people inside and outside the administration say has become overly defined by the American pressure on Israel to halt settlement construction on the West Bank.

If Obama's pressure on Israel to halt new construction in West Bank settlements was Phase 1 of his Mideast game plan, Marc Lynch says we're now moving on to Phase 2:

This, I suspect, is something very different: a strategic communications campaign designed to build support for a push towards a two-state solution among key Israeli, Palestinian, and Arab constituencies.  Reassurance, yes, but within the context of explaining the  American view of the urgency of the moment for a push towards peace — and of building support for, and even a demand for, such a push towards peace among those publics.  There are many tools which could be deployed in such a campaign — not just the television interviews mentioned in the article, but the whole portfolio of campaign outreach tools, including new media, which could be deployed in support of such a strategic objective.

Along with practically everyone else on the planet, I've been extremely non-optimistic for the past decade about the chances for some kind of Israeli-Palestinian accord.  And Obama or no Obama, I can't say that anything recently has changed my mind.  It still seems politically impossible for Israel to take any serious action on the settlements, just as it seems unrealistic to expect that Fatah and Hamas can come to any kind of agreement that allows them to effectively represent Palestinian interests.  There are distinct limits to what Obama's oratory can do, and this seems like one of them.  But I'm glad he's at least trying.

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Follow the Money

| Mon Aug. 3, 2009 12:04 PM EDT

Clean-energy companies have increased their K Street spending by 5x over the past couple of years.  But Bloomberg reports it's still a drop in the ocean:

Exxon Mobil Corp., the biggest U.S. oil producer, spent more on Washington lobbying during the first half of the year than all clean-energy companies combined, researcher New Energy Finance Ltd. said.

Exxon Mobil, based in Irving, Texas, spent $14.9 million lobbying in the six months, 23 percent more than the $12.1 million laid out by companies that make solar panels or wind turbines to generate electricity, London-based New Energy Finance said today in a note to clients.

The entire oil and gas industry spent $82.2 million in the first half of the year.  If you're ever wondering why the Waxman-Markey climate bill kept getting watered down so much, now you know.

The Economics of Social Destruction

| Mon Aug. 3, 2009 12:56 AM EDT

As he so often does, Paul Krugman gets to the heart of what's wrong with the financial industry these days:

Even before the crisis and the bailouts, many financial-industry high-fliers made fortunes through activities that were worthless if not destructive from a social point of view.

[Recent examples include high-frequency trading and Andrew Hall's multi-billion dollar oil speculation.]

Just to be clear: financial speculation can serve a useful purpose. It’s good, for example, that futures markets provide an incentive to stockpile heating oil before the weather gets cold and stockpile gasoline ahead of the summer driving season.

But speculation based on information not available to the public at large is a very different matter. As the U.C.L.A. economist Jack Hirshleifer showed back in 1971, such speculation often combines “private profitability” with “social uselessness.”....As the great Stanford economist Kenneth Arrow put it in 1973, speculation based on private information imposes a “double social loss”: it uses up resources and undermines markets.

Now, you might be tempted to dismiss destructive speculation as a minor issue — and 30 years ago you would have been right. Since then, however, high finance — securities and commodity trading, as opposed to run-of-the-mill banking — has become a vastly more important part of our economy, increasing its share of G.D.P. by a factor of six. And soaring incomes in the financial industry have played a large role in sharply rising income inequality.

So what's to be done?  Krugman ran out of room before he could make any suggestions other than taxing high incomes, and I'm not sure that's really all that useful anyway.  There's a more basic problem here that has to do with financial transparency, the rise of derivatives, widespread abuse of leverage, and the basic profitability of the financial sector.  It's getting late and I don't feel like speculating on that right now, but one way or another, that's where we ought to apply our energies.

Tomato Woes

| Sun Aug. 2, 2009 11:42 PM EDT

A couple of months ago we bought one of those upside-down tomato planters you might have seen advertised on TV.  I like it.  It hangs right outside my window, so I get to watch it grow every day.

And it's done well.  At least, we thought it was doing well until the first tomatoes ripened and we took a look at them.  The top halves are all fine, but the bottoms all look like the ones in the picture: convered with a gray, pulpy mass and basically ruined.  I'm not sure what causes this kind of thing.  Is it a bug?  A parasite?  Overwatering?  An alien nanobot infestation?  Something else?

I desperately need advice.  Are there any expert tomato farmers out there who can tell me what's going on?

....Are Condemned to Repeat It

| Sun Aug. 2, 2009 11:34 PM EDT

Responding to a John Quiggin post lamenting the fact that the financial disasters of the late 90s produced no real regulatory action, Matt Yglesias says:

Whatever you think of Greenspan’s overall legacy [...] I think it’s a bit hard to regret that he acted swiftly and decisively to keep the world out of a major recession at the turn of the millennium....Letting things fall apart would have led to millions of additional unemployed people, state budget crises, cutbacks in critical social services, etc., etc., etc.

But it really does seem that the success of these operations was taken as a reason to avoid any serious systematic reform. And you can feel the same kind of thing happening today. It’s disturbing.

You can say that again.  Part of the reason for this might be the fact that even now, with wild figures being routinely thrown around about the size of the bailout ($17 trillion! $23 trillion! 3 years of GDP!), most people still don't truly understand the size and scope of the government action that was required to keep the private sector from melting down completely.  And the reason is pretty simple: the vast, vast majority of it was done behind the scenes by the Fed.  TARP and the stimulus bill were the only parts that really got any public scrutiny.  All the rest was done without congressional debate via an alphabet soup of loan guarantees, term facilities, interest rate reductions, conservatorships, currency swaps, commercial paper backstops, interest on reserve balances, liquidity pumps, collateral forbearance, asset stop-loss guarantees, and more.  This stuff is never going to add up to the astronomical sums people have been tossing out, but it's still a huge amount of money.  And without it, the entire financial industry would have collapsed.

But in the event, the Fed did do all this stuff, and the result is that what most people see is a bad recession but nothing more.  Just part of the business cycle, thankyouverymuch, and like other recessions it will end soon and life will go on.  And needless to say, the financial industry will be lobbying its ass off to make sure that Congress is inclined to see things the same way.  Disturbing indeed.