Kevin Drum - December 2010

Adding Up the Tax Cuts

| Tue Dec. 7, 2010 5:31 PM EST

Ezra Klein adds up the tax cut numbers:

If you look at the numbers alone, the tax cut deal looks to have robbed Republicans blind. The GOP got around $95 billion in tax cuts for wealthy Americans and $30 billion in estate tax cuts. Democrats got $120 billion in payroll-tax cuts, $40 billion in refundable tax credits (Earned Income Tax Credit, Child Tax Credit and education tax credits), $56 billion in unemployment insurance, and, depending on how you count it, about $180 billion (two-year cost) or $30 billion (10-year cost) in new tax incentives for businesses to invest.

So that's $125 billion for Republicans and $216 billion for Democrats (not counting the business investment stuff). Yay Democrats!

Or not. As Ezra says later, quoting a senior administration official, "Republicans were extremely eager to get benefits for the top tenth of a percent of Americans." And when you're dealing with such a tiny number of people, a small pot of money goes way, way further than a bigger pot divided up among the vast majority.

Over the past 30 years the wages of most Americans have grown more slowly than the rate of overall economic growth. The difference isn't much: maybe half a percentage point or so. It's easy not to notice, or to handwave away if you do decide to notice it. But over 30 years, that adds up to a lot of money if it all gets funneled to the top 1%. This is fundamental to understanding what's happened to the American economy in recent decades: a little bit of money from a large number of people becomes a very large amount of money when it gets channeled into the bank accounts of a tiny number of wealthy rentiers.

So is $216 billion vs. $125 billion a victory for the common man? Of course not. It means most of us get a few hundred dollars while the rich get hundreds of thousands or even millions each. The rich are willing to make that deal every day. Wouldn't you?

UPDATE: The chart above, from CAP's Michael Linden, illustrates the whole thing graphically.

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Obama Goes Medieval on the Left

| Tue Dec. 7, 2010 4:41 PM EST

Damn. I skipped Obama's press conference today, but I guess that was a big mistake. If my Twitter feed is anything to go by, progressive heads were exploding all over the intertubes. Here is Philip Klein's summary:

Obama reserved some of his harshest criticism for liberals, who he scolded for being "sanctimonious" purists who wouldn't be able to accomplish anything if they got their way. To drive home his point, he complained about the way liberals behaved during the health care debate, sounding like an unappreciated lover.

"Somehow this notion that we are willing to compromise too much reminds me of the debate we had during health care," Obama said. "This is the public option debate all over again. So I pass a signature piece of legislation where I finally get health care for all Americans, something that Democrats have been fighting for for 100 years, but because there was a provision in there that they didn't get that would have affected maybe a couple million people, even though we got health insurance for 30 million people, and the potential for lower premiums for 100 million people that somehow that was a sign of weakness and compromise. Now if that's the standard against which we are measuring success or core principles, then let's face it, we will never get anything done. People will have the satisfaction of having a purist position, and no victories for the American people. And we will be able to feel good about ourselves and sanctimonious about ourselves about how good our intentions are, how tough we are."

At the same time, Obama also compared negotiating with Republicans to negotiating with hostage takers, and if I had more conservatives in my Twitter feed I'd probably be hearing a few winger heads exploding too.

Still, it's obvious that Obama is more personally stung by criticism from the left than from the right. His outburst about "purist" liberals was considerably more impassioned than his rather clinical description of Republican "hostage takers." In one sense, this isn't surprising: you expect the opposition to show no mercy and that hardens you to it. You really don't expect it from your putative allies. But in another sense it is surprising: even if Obama thinks his progressive critics are off base, he must know by now how they're going to react to compromises like yesterday's tax cut deal. So why was he apparently so unprepared for this? Why deliberately make things worse with his base during a press conference?

Answer 1: he just lost his temper a bit. It happens to everyone. Answer 2: it was all precisely calculated. He's convinced that Democrats lost in November because of defections from independents, not liberals, so he's trying to do everything he can to distance himself from the left and win back the center. My guess is that #1 accounts for 10% of his performance and #2 accounts for 90%. After all, we've seen this movie before in 1994.

Anyway, here's a few predictions. (1) Purist liberals better get used to rhetoric like this. I think we're going to see more of it. (2) Even so, everyone needs to give up on the idea of Obama being challenged by anyone substantial in the 2012 primary. Even Democrats aren't that suicidal. (3) Hated or not, Obama's tax deal is fairly good for the economy and it quite likely cements his reelection chances. If GDP growth is even in the neighborhood of 3% a year from now, I don't think he's beatable. (4) Looking at American politics from a 100,000-foot level, conservatives have won. Programmatic liberalism is essentially dead for a good long time, and small bore stuff is probably the best we can hope for over the next 10-20 years — though social liberalism will continue to make steady advances. I reserve judgment on whose fault that is.

POSTSCRIPT: Several people think #4 could use a wee bit of further explanation. Agreed! The short explanation is here. The longer version you'll have to wait a while for. It's coming in a couple of months or so. (Print lead times are a bitch.....)

What Will the EPA Do Next?

| Tue Dec. 7, 2010 2:50 PM EST

With Republicans running the House, says Brad Plumer, new environmental legislation is dead. So whatever happens is only going to happen via EPA rulemaking. But that's not going so well. For example, take a new rule that would limit toxic pollution from industrial boilers and solid-waste incinerators:

This isn't just some abstract tree-hugging measure; it would arguably do more for public health than any section of Obamacare....(All told, the rule would have cost an estimated $6.4 billion each year while delivering between $138 billion and $334 billion in annual health benefits — not a bad deal.) But the affected industries all griped that the costs were way too burdensome and buried the EPA in angry comments.

Now, EPA officials say they're seeking a delay because all those comments made them realize that the air-toxics rule could be structured more carefully. That's plausible. But it's also true that the agency has been under excruciating political pressure of late. Nearly 100 lawmakers have complained about the boiler rules. The likely new head of the House energy committee, Fred Upton, has bashed the standards and is promising to drag EPA head Lisa Jackson in for enhanced interrogation. (Upton's concern? The Council of Industrial Boiler Owners thinks the costs will be far greater than EPA is projecting. It's worth noting that, historically, pollution rules tend to be cheaper than even the EPA expects.) And House Republicans will have a say in the agency's budget going forward, so Jackson can't just ignore them.

Yeah, I think it's safe to say that industry complaints about the cost of this new regulation will, as usual, turn out to be wildly overblown. And Jackson's caution in the face of a mountain of industry comments might simply be an attempt to make sure the new rule withstands court challenges after it's implemented.

More broadly, though, Brad suggests that this rule is a harbinger: there's plenty of other stuff coming down the pike, and EPA's willingness to tackle the boiler rules aggressively will give us a good idea of whether they're willing to tackle the rest of their agenda aggressively too. "It's unclear," he says, "just how hard the agency is willing to battle." Read the rest for more.

Have Yourself A Merry Little Christmas

| Tue Dec. 7, 2010 12:57 PM EST

A bit of holiday twittering today:

I realize this is possibly the least important topic of all time. But I'm just curious if anyone else reacts badly to "Have Yourself A Merry Little Christmas"? I know it's a beloved classic, I know it brings tears to the eyes of the audience in the movie, and I even know that my interpretation, ripped out of the context of the movie, barely even makes sense. And yet....the phrase "merry little Christmas" has always struck me as unbearably condescending. Like "cute little thing" or "something for the little people." It makes me wince every time I hear it.

Anyone else ever feel this way? Or is it just some bizarre Drumism?

Playing Chicken With the Debt Ceiling

| Tue Dec. 7, 2010 12:31 PM EST

Mike Konczal is unhappy that raising the debt ceiling wasn't explicitly part of Obama's tax deal with Republicans yesterday:

This should be a no-brainer and a deal-breaker for liberals considering supporting this bill. No Democrat should support this compromise without this issue being addressed. The debt ceiling is going to be hit sometime early next year, between February and April. Alan Simpson is already bragging about how this vote will be a “bloodbath”, forcing the austerity agenda into action. It would not surprise me if the new Congress moved to cut back on the stimulus program and force deep cuts at that moment when this new stimulus is getting going, and the idea that Obama will show leadership in averting this crisis can no longer be assumed.

I'm going to put on my Slate hat and be contrarian about this. First off, it doesn't matter what Alan Simpson says. He runs off his mouth routinely and he's not even in Congress, let alone part of the Republican leadership. So who cares what he says? Second, and more important, the political incentives are different now.

With a comprehensive, budget-busting tax deal in place, the only thing left for Republicans to complain about is spending. And they will. But they're in a fairly weak position. They're already on record supporting a deal that blows up the deficit, so they can hardly claim to be simon pure on that front. And with the House in Republican hands, they're as responsible for the budget as Democrats. They'll fight for reductions here and there, but I frankly doubt that they're going to risk losing votes from important constituencies by pushing hard for significant cuts in major programs. In the end, they'll compromise with the Senate in conference, as they always do, with both sides making minor concessions. And once they've done that, they don't really have much leverage to complain about the debt ceiling. Some tea party backbenchers will blow off steam complaining about it, but the GOP leadership will let them vent and then get down to the business of rounding up the votes for passage.

I could be off base about this. But I'm just not sure that either John Boehner or Mitch McConnell has the stomach for this fight. What matters is taxes and spending, and once they've cut a deal on those two things — as I think they will — they can't really backtrack and pretend to get self-righteous about the debt ceiling. There may be a few days of drama as both sides play a bit of brinksmanship for their respective bases, but that's about it.

What are Julian Assange's Sex Charges All About?

| Tue Dec. 7, 2010 11:31 AM EST

Is WikiLeaks founder Julian Assange guilty of rape? That's for a Swedish court to decide. But if you're interested in the details of exactly what the charges against Assange are, Richard Pendlebury has a pretty thorough rundown in the Daily Mail today. Basically, it involves consensual sex that allegedly turned unconsensual because (in one case) a condom broke and (in the other case) Assange refused to wear a condom in the first place — both of which are crimes in Sweden under the circumstances Assange is charged with (i.e., forcibly continuing with intercourse despite the withdrawal of consent). Pendlebury is very clearly skeptical of both the charges and the women who brought them ("the more one learns about the case, the more one feels that [] the allegations simply don’t ring true"), so you should ignore some of the loaded language he uses. But he does lay out the basic narrative fairly well.

It's pretty obvious that the timing of the sex charges against Assange is fishy. At the same time, it's striking — though not really surpising — how ideologically charged this has become. The motivations of the accusers aside, if there's evidence that the Swedish court system is corrupt I haven't heard it yet. Skepticism may be in order, as it is with anyone accused but not convicted of a crime, but Assange's guilt or innocence surely depends on the evidence, not on whether you approve or disapprove of WikiLeaks.

UPDATE: Reuters has more details here: "The two Swedish women who accuse WikiLeaks founder Julian Assange of sexual misconduct were at first not seeking to bring charges against him. They just wanted to track him down and persuade him to be tested for sexually transmitted diseases, according to several people in contact with his entourage at the time."

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Houston, the Tax Cuts Have Landed

| Mon Dec. 6, 2010 7:35 PM EST

Apparently President Obama has reached a tax cut deal with Republican negotiators. It will extend all the Bush tax cuts for two years and do a few more things besides:

The deal includes reducing the 6.2 percent Social Security payroll tax on employees by two percentage points for a year....It also includes continuation of a college-tuition tax credit for some families, an expansion of the earned income tax credit and a provision to allow businesses to write off the cost of certain equipment purchases.

The deal, which is not yet finalized, would include a 13-month extension of jobless aid for the long-term unemployed. Benefits have already started to run out for some people, and as many as 7 million people would potentially lose assistance within the next year, administration officials said.

....The White House was also said to have agreed to Republican demands on the estate tax that would result in an exemption of $5 million per person and a maximum rate of 35 percent.

This is....not too bad. I continue to think that it's stupid to extend the tax cuts for two years instead of three, and caving in to Republican demands for an estate tax cut for the absolute wealthiest sliver of the population is grating as hell. On the positive side, the payroll tax holiday (semi-holiday, anyway) is a good idea, the extension of various tax credits is a good idea, and the 13-month extension of unemployment insurance is much better than expected. This isn't anyone's idea of dream legislation, but it could be a lot worse.

But how stimulative is it? Answer: not much in a positive way, but it does prevent the elimination of current programs that would have been contractionary. And the payroll tax cut will be fully paid for out of the general fund, so it won't affect Social Security's long-term solvency. The big question, of course, is whether it will be possible to allow the payroll tax cut to expire in a year without a big fight from Republicans accusing Democrats (yet again) of wanting to raise taxes. I don't think that's going to be a big problem. Partly this is because 2011 isn't an election year, which makes posturing less effective, but mainly because Republicans don't care much about taxes on the middle class. Take a look at this interview with Grover Norquist: he's pleased about the main tax cut and "especially pleased" about the estate tax cut, but he doesn't even mention the payroll tax cut. He just doesn't care.

Politically, this is probably a win for Obama. The liberal base won't like the deal much, but they won't hate it either. And the vast middle of the country will like it just fine. I continue to think that running on repeal of the high-end tax cuts in 2012 will be a problem, but apparently Obama disagrees. We'll see.

POSTSCRIPT: I hate to move the spotlight away from jobs and onto "boutique social issues," but I sure hope that Obama has gotten a side deal from three or four Republicans to support repeal of DADT now that taxes are out of the way. It would be a serious dereliction not to nail this down during the lame duck session.

Chart of the Day: Who Votes, Who Counts

| Mon Dec. 6, 2010 7:13 PM EST

Via Ezra Klein (and simplified by me), this chart largely explains why sky-high unemployment hasn't produced any real sense of urgency in our political class. It's because unemployment is high among people who don't vote and low among people who do. If the stock market were crashing or corporate profits were down, that would be one thing. But unemployment? It's just not that big a deal.

Economics and Crankery

| Mon Dec. 6, 2010 3:45 PM EST

Noah Millman writes a long post today about people — conservatives mostly — who claim to maintain a radical skepticism toward conventional economic remedies for our lousy economy. He ends with this:

What professed skepticism frequently amounts to is a vulnerability to crank theories. The people I know who tend “not to trust” doctors would, of course, go to a doctor if they broke their legs. But they believe that cancer is best treated with herbal remedies — or that vaccinations cause autism — or that mental disorders like depression have no chemical basis — and so forth. That is to say: where scientific knowledge is limited, they prefer the advice of those opposed to the establishment. That’s their heuristic.

And I see the same sort of thing with respect to economics. None of the people I know who profess to believe that “fiat money” is a fraud and that therefore we’re all doomed — and I know, many, many such people, including professional investors — actually behave in their private or professional life in the way that they would if they really believed such a thing. But professing such a believe does make them vulnerable to specific truth claims from specific fellow-adherents in areas where scientific knowledge is limited (such as debates about what the optimal monetary policy might be). Again: the heuristic is: when we are in the gray areas, I listen to the cranks. In neither case does this strike me as a particularly defensible heuristic when exposed to the light of day.

That might be it. But there's also the simple fact that conventional economics suggests that government should take actions that conservatives dislike for ideological reasons. For a lot of them, that's reason enough to oppose conventional economics, with radical skepticism merely playing a role as their chosen justification.

Fighting WikiLeaks

| Mon Dec. 6, 2010 1:49 PM EST

Clay Shirky is conflicted about WikiLeaks: he acknowledges that over the long haul human organizations of all kinds require a certain amount of backroom negotiation, but he also thinks that the appearance of a guy like Julian Assange working to subvert a bureaucracy overly addicted to secrecy is occasionally a good thing. "The periodic appearance of such unconstrained actors in the short haul is essential to increased democratization, not just of politics but of thought."

But he's not conflicted about how the United States ought to respond. If we pass a law criminalizing what WikiLeaks does, that's one thing — even if he doesn't like the law. But ignoring the law is quite another:

When a government can’t get what it wants by working within the law, the right answer is not to work outside the law. The right answer is to accept that it can’t get what it wants. The United States is — or should be — subject to the rule of law, which makes the extra-judicial pursuit of Wikileaks especially nauseating.

....I think the current laws, which criminalize the leaking of secrets but not the publishing of leaks, strike the right balance. However, as a citizen of a democracy, I’m willing to be voted down, and I’m willing to see other democratically proposed restrictions on Wikileaks put in place....The key, though, is that democracies have a process for creating such restrictions, and as a citizen it sickens me to see the US trying to take shortcuts. The leaders of Myanmar and Belarus, or Thailand and Russia, can now rightly say to us “You went after Wikileaks’ domain name, their hosting provider, and even denied your citizens the ability to register protest through donations, all without a warrant and all targeting overseas entities, simply because you decided you don’t like the site. If that’s the way governments get to behave, we can live with that.”

I'd add one other thing: if you're going to declare war, you should only do it if the war is winnable. This one sure doesn't seem to be, and our ragtag offensive against WikiLeaks is doing little except making us look helpless against a pipsqueak. It's a lot like the counterinsurgencies we keep failing at in meatspace, except squared or cubed. After all, even a "war against terror" might be unwinnable but still manage to minimize terrorist attacks. But as near as I can tell, we could literally kill every person associated with WikiLeaks, impound every cent of their money, and take down all their servers, and it would have virtually no impact. All the existing documents would still be available, and other groups would pop up almost instantly to take WikiLeaks' place. I guess I might be underestimating our capabilities in this area, but I doubt it. I just don't see how you can win a war like this in the long run. I don't even see how you can degrade this kind of activity significantly short of running a Stalinesque security state.

So which is worse: losing a battle, or fighting a long, grinding war and then losing anyway? The latter, right?