Kevin Drum - June 2010

Boehner vs. Boehner

| Tue Jun. 29, 2010 1:57 PM EDT

Now that the Republican caucus has apparently decided to unanimously oppose any reform of our financial system, House GOP leader John Boehner explains his party's objections to the final bill reported out of conference last week:

This is killing an ant with a nuclear weapon.

And here is Boehner's spokesman "explaining" what he meant:

It's clear Boehner is not minimizing the crisis America faced — he is pointing out that Washington Democrats have produced a bill that will actually kill more jobs and make the situation worse.

So here's a question: do the standards of journalism require us to take this explanation at face value? I mean, it's obvious to a fourth grader what Boehner meant: he thinks there were only minor problems with the financial system before the crash, and we just don't need anything more than a few tweaks here and there to fix things up. He decidedly was minimizing the problems on Wall Street during the years that led up to the crisis.

But do we now have to pretend that's not what he meant simply because his press flack says that's not what he meant? Or can we act like adults and interpret his remark in the obvious way? Stay tuned for media reaction later today to find out.

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Still No Deficit Hawks in the GOP

| Tue Jun. 29, 2010 12:07 PM EDT

On the scale of the federal budget, $18 billion is a rounding error. Literally. It's about one-half of one percent of the budget, which rounds down to zero. But a small group of moderate Republicans are threatening to vote no on financial reform because an $18 billion fee is included in the final bill.1 It's not there to punish banks or to create a slush fund for new spending. It's there solely to make the bill deficit neutral. Ryan Avent:

And yet the most moderate Republicans in the Senate are balking at the charge. Not because they disagree in any real sense with the economics of the fee. They simply won't vote for anything that looks like a tax.

This is why it's so difficult to imagine a solution to America's long-run budget crisis. It's a political impossibility to move to primary surplus on the back of spending cuts alone. Democrats are highly unlikely to win a Senate majority comfortably over 60 seats any time in the near future. And the most moderate Republicans won't vote for tax increases, even when the increase in question is a relatively small, one-off charge on big banks.

There's no room for compromise on the deficit there. Zero. The Journal story is trouble for the fate of the financial reform bill, but it should worry deficit hawks even more.

And I suppose it would worry them if there were any actual deficit hawks in the Republican Party. But there aren't, are there? There are plenty of tax-on-rich-people-and-corporations hawks, but no deficit hawks. Let's stop pretending otherwise, OK?

1Actually, I got this wrong: it's $18 billion over ten years, which works out to about .05% of the federal budget. In other words, it's really a rounding error.

California's Dim Idea

| Tue Jun. 29, 2010 11:50 AM EDT

On the off chance that you thought there was any intelligent life in California's capital, here's the latest from Sacramento:

Motorists who already feel bombarded by digital billboards, freeway advertisements and vinyl-wrapped buses say a new proposal to put ads on license plates is a bad sign. State lawmakers' flirtation with digital license plates moved another step forward Monday as the Assembly Transportation Committee voted 9-0 in favor of a feasibility study to determine if advertising revenue from millions of digital license placards would help close the state's $19.1-billion deficit.

This is surely one of the most moronic ideas in history. Just think: in the near future, California drivers could be distracted not just by digital billboards, digital phones, and digital nav systems, but by millions of blinking, flashing, scrolling digital license plates! And just to make the idea even better, there's no chance that this would have more than the most minuscule effect on the state budget. It's perfect! No wonder the feasibility study passed unanimously.

Quote of the Day: Ideology in Economics

| Tue Jun. 29, 2010 11:14 AM EDT

From Mike Konczal, on his first experience with PhD-level macroeconomics:

Speaking as someone who has taken graduate coursework in “continental philosophy”, and been walked through the big hits of structural anthropology, Hegelian marxism and Freudian feminism, that graduate macroeconomics class was by far the most ideologically indoctrinating class I’ve ever seen. By a mile. There was like two weeks where the class just copied equations that said, if you speak math, “unemployment insurance makes people weak and slothful” over and over again. Hijacking poor Richard Bellman, the defining metaphor was the observation that if something is on an optimal path any subsection is also an optimal path, so government just needs to get out of the way as the macroeconomy is optimal absent absurdly defined shocks and our 9.6% unemployment is clearly optimal.

Ideology is everywhere, and it's often strongest in the very places that pretend the hardest that they don't cater to it. Economics, unfortunately, is still an immature discipline, much more complex than something like chemistry or physics, and that means that if you pick your assumptions carefully you can prove almost anything you want. And economists do.

Avoiding Ireland's Fate

| Tue Jun. 29, 2010 1:26 AM EDT

Liz Alderman of the New York Times reports on Ireland's efforts to retain the confidence of international investors by cutting spending after the financial implosion of 2008:

Rather than being rewarded for its actions [] Ireland is being penalized. Its downturn has certainly been sharper than if the government had spent more to keep people working. Lacking stimulus money, the Irish economy shrank 7.1 percent last year and remains in recession. Joblessness in this country of 4.5 million is above 13 percent, and the ranks of the long-term unemployed — those out of work for a year or more — have more than doubled, to 5.3 percent.

....Despite its strenuous efforts, Ireland has been thrust into the same ignominious category as Portugal, Italy, Greece and Spain. It now pays a hefty three percentage points more than Germany on its benchmark bonds, in part because investors fear that the austerity program, by retarding growth and so far failing to reduce borrowing, will make it harder for Dublin to pay its bills rather than easier.

In the case of Ireland, it's not clear if they had a lot of choice. They're a eurozone country, so they couldn't devalue their currency, and they're running monster deficits even with the cutbacks they've made. Bigger deficits might simply not have been possible for a country their size.

Still, the results are pretty obviously horrific, and any country that can avoid Ireland's fate surely ought to. We certainly can, for example. So why do so many people want us to follow the Irish path instead?

Russ Feingold's Bad Choice

| Mon Jun. 28, 2010 10:00 PM EDT

In the wake of a historic economic collapse caused largely by a financial industry allowed to run rampant, Sen. Russ Feingold (D–Wisc.) has decided to vote in favor of doing nothing at all to address this:

As I have indicated for some time now, my test for the financial regulatory reform bill is whether it will prevent another crisis. The conference committee’s proposal fails that test and for that reason I will not vote to advance it. During debate on the bill, I supported several efforts to break up ‘too big to fail’ Wall Street banks and restore the proven safeguards established after the Great Depression separating Main Street banks from big Wall Street firms, among other issues. Unfortunately, these crucial reforms were rejected. While there are some positive provisions in the final measure, the lack of strong reforms is clear confirmation that Wall Street lobbyists and their allies in Washington continue to wield significant influence on the process.

Can I vent for a minute? I know Feingold is proud of his inconoclastic reputation. I know this bill doesn't do as much as he (or I) would like. I know the financial industry, as he says, continues to have way too much clout on Capitol Hill.

But seriously: WTF? This is the final report of a conference committee. There's no more negotiation. It's an up-or-down vote and there isn't going to be a second chance at this. You either vote for this bill, which has plenty of good provisions even if doesn't break up all the big banks, or else you vote for the status quo. That's it. That's the choice. It's not a game. It's not a time for Feingold to worry about his reputation for independence. It's a time to make a decision between actively supporting something good and actively supporting something bad. And Feingold has decided to actively support something bad.

What's more, his reasons for doing this don't even make sense. This bill won't prevent another crisis? No it won't, but voting for the status quo does even less. It doesn't break up the big banks? The status quo does even less. It suffers from too much lobbyist influence? Well, Wall Street lobbyists are far more enthusiastic about the status quo than they are about this bill. There are only two choices available here, and on virtually every level Feingold is voting in favor of the alternative that does less of what he says he wants.

But who knows? Maybe this won't make any difference. Maybe Harry Reid will be able to round up three or four Republicans to vote in favor of proceeding. But maybe not. With Robert Byrd's death, Feingold's vote could end up being the one that dooms financial reform for another decade. I sure wouldn't want that to be my legacy.

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One-Click Shopping Still Owned by Amazon

| Mon Jun. 28, 2010 9:09 PM EDT

Hidden among all the big-ticket Supreme Court decisions handed down today, Nick Baumann reports on one of the less momentous ones:

On Monday, the Supreme Court affirmed a lower court ruling that struck down Bernard Bilski and Rand Warsaw's "business method" patent for hedging energy prices against the weather. Some observers had hoped that the court would issue a broad ruling rejecting many "business method" patents — such as's "one-click" purchasing — entirely. (Critics of business method patents argue that you shouldn't be able to get patent protection for something as supposedly "obvious" and vague as one-click ordering.) Instead, the court ruled narrowly....That leaves the door open for the Patent Office to continue granting recognition to things like Amazon's one-click.

Well, that's a drag. I think that business method patents are harder to get now than they used to be, but Amazon's ridiculous one-click patent was granted this year after they revised a few of their claims. It's idiocy. I'd be delighted to see the Supreme Court or Congress do away with the whole business method patent cesspool entirely. The triviality of most business method claims has long since gotten way out of hand, and the whole world would be better off if we just put an end to them.

Preference Ordering Among the Wingers

| Mon Jun. 28, 2010 5:36 PM EDT

A few days ago Mark Kleiman noted that although cap-and-trade was originally a conservative idea, it almost instantly became a conservative bête noir when liberals began to embrace it. Matt Yglesias followed up with the Earned Income Tax Credit and Section 8 housing vouchers as similar conservative ideas that fell out of favor when liberals adopted them. Steve Benen fills in some additional detail:

This is important. Cap-and-trade — any version of it — has been deemed wholly unacceptable by Republicans this year. But given the intense opposition to the idea, it's easy to forget that Republicans used to consider cap-and-trade a reasonable, market-based mechanism that was far preferable to command-and-control directives that the right found offensive.

And I'm not talking about the distant past — the official position of the McCain/Palin Republican presidential ticket, not even two years ago, was to support cap-and-trade. Not just in theory, either. The official campaign website in 2008 told Americans that John McCain and Sarah Palin "will establish ... a cap-and-trade system that would reduce greenhouse gas emissions." McCain/Palin's official position added, "A cap-and-trade system harnesses human ingenuity in the pursuit of alternatives to carbon-based fuels."

Actually, I think conservatives have a pretty defensible position on these things. Take pollution regs. Their preferences go something like this:

  • Worst: Command and control
  • Better: Cap-and-trade
  • Best: No regs

If they have the opportunity to support cap-and-trade when the alternative is almost certainly some kind of command-and-control mandate (as in the case of acid rain), then they'll take cap-and-trade. Half a loaf is better than none. But their strongest preference is still to do nothing. So in the case of greenhouse gas emissions, where there's still a credible chance of having no regs at all, they oppose cap-and-trade. There's really nothing especially devious about this.

But how about Sarah Palin, who specifically supported cap-and-trade for greenhouse gases just two years ago and now assails it as a job-killing monster? Well, that's harder to justify, but still possible. After all, it's hardly news that vice presidential candidates are routinely forced to officially support the policies of their running mate even if they disagree with them. In fact, it's a longtime media sport to force them to somehow justify their change of position even though everyone knows exactly what's going on. So Sarah Palin played along as a good soldier in 2008, but once the campaign was over she no longer had an obligation to her ticket and was able to revert to her true position. It's not exactly a principled conversion, but it's hardly the height of hypocrisy either.

So fine. But how about John McCain himself? He didn't owe any kind of fealty to anyone else. Cap-and-trade was his plan for reining in greenhouse gases, he fought for it, and he believed it. At least, he said he did. But then, as soon as he lost an election in which cap-and-trade seemed like an electoral winner and started up a campaign in which it seemed like an electoral loser, he dumped it. How about that?

Here, I'm afraid I can't help. There's just no excuse for this. John McCain is a slick opportunist and always has been. There's just no there there.

Bloggers are the New Columnists

| Mon Jun. 28, 2010 3:11 PM EDT

L'Affaire Weigel, which I followed only lightly since I was away when it unfolded, has apparently now morphed into a question of whether partisan bloggers are "real" reporters or, as several anonymous Washington Post workers put it, just embarrassments waiting to happen. Greg Sargent weighs in:

The cowardly hiding behind anonymonity is pathetic enough. But let's take on the substance of this. I submit that someone can be a "real" reporter if he or she is accurate on the facts and fairly represents the positions of subjects; if he or she has a decent sense of what's newsworthy and important to readers; and if readers come away from his or her stuff feeling more informed than they were before.

There's simply no reason why caring what happens in politics — prefering one outcome to another — should inherently interfere with this mission. By publicly advertising a point of view, bloggers are simply being forthcoming about their filter: They are letting readers in on what guides their editorial choices. This allows readers to pick and choose communities where they can expect discussions about topics that interest them with other, generally like-minded readers.

[Etc. etc.]

Look: this is ridiculous. There's just nothing new here. The Post, along with other newspapers, has long had opinionated reporters. They were and are called "columnists." Robert Novak was a columnist with a conservative inclination. David Broder is a columnist with a centrist inclination.  E.J. Dionne is a columnist with a liberal inclination. All three are also good reporters, and no one at the Post has ever suggested they're a disgrace to the good name of journalism.

Whether Weigel was wise to make the comments he did about the people he covers is one thing — though I'll bet there are few reporters alive who haven't done the same. They just haven't been outed by someone with an axe to grind. But broadly speaking, being a blogger is the same thing as being a columnist except in pixels instead of ink. It's a long and well-accepted position. Why the hell do so many mainstream reporters still have a problem with this?

Deficit Hawks vs. Deficit Posers

| Mon Jun. 28, 2010 2:20 PM EDT

Should we spend more to stimulate the economy? Or spend less because runaway debt is threatening our fiscal health? Ezra Klein comments:

Few economists, I think, would argue against the combination of short-term spending and longer-term deficit reduction if they believed the deficit reduction was certain. But the American political system has a lot of trouble making unpopular choices and some trouble sticking to those choices once they're made.

This is where you might expect a bloc of deficit hawks to step into the middle of the legislative debate with a proposal pairing spending in 2011 with savings beginning in 2014, but we've seen no such thing.

I think I'd put this differently: there is no bloc of deficit hawks. End of story. There are a few individuals here and there who are sincere about cutting the deficit, but a bloc? Not even close. They're almost all posers.

But Kevin, you say, how can you know this? Can you read the minds of men and women three thousand miles away? Actually, no — though it would be pretty cool if I could. But in this case I can do something almost as good: I can look at the public evidence. And that evidence is crystal clear: there are lots of members of Congress who are willing to talk endlessly about deficits, but there are very, very few who are willing to publicly support specific cuts. There are fewer still who are willing to publicly support cuts that might affect any of their own constituents. And there are fewer still who have shown any inclination to actually vote for serious cuts when they've had the power to do so. So: no bloc of deficit hawks.

Still not convinced? Well, Ezra is right that America's political system (like every other democracy's) has a lot of trouble making unpopular choices, but it's not entirely impossible to stick to spending cuts and tax increases once they've been made. It's true that anything one Congress does, another can undo. But the fact is that tax increases have been phased in over time in the past, and the phase-ins have taken effect. Likewise, entitlement cuts have been phased in over time, and those cuts have taken effect. Not always, but a lot of the time. If Congress actually had the will to legislate Medicare and Social Security cuts that phased in over ten years starting in, say, 2013, there's a very strong likelihood that the cuts would happen. The 1983 Social Security compromise, for example, gradually raised the retirement age over a span of two decades starting in 2003, and that has taken place exactly on schedule.

Really, the only serious issue is actually doing it, not having faith that the cuts will actually happen. Discretionary cuts are very difficult to promise credibly, but entitlements have always worked largely on autopilot once the rules are set. If there were genuinely a bloc of deficit hawks in Congress, they'd be willing to vote for both Medicare cuts and tax increases that phase in over a period of years. But almost none of the supposed deficit hawks are willing to do either of these things, let alone both. They're posers.